GN 05001.005 Taxation of Benefits

This chapter defines a “social security benefit” and explains how to handle taxation of benefits inquiries.

Some beneficiaries have to pay federal income taxes on their Social Security benefits. This usually happens if they have other substantial income (such as wages, self-employment, interest, dividends and other taxable income that individuals report on their tax returns) in addition to their benefits. No one pays federal income tax on more than 85 percent of his or her Social Security benefits based on the IRS rules.

Equivalent tier 1 railroad retirement benefits are the part of tier 1 benefits that a railroad employee or beneficiary would have been entitled to receive under the social security system. They are commonly called the Social Security Equivalent Benefit (SSEB) portion of tier 1 benefits. Individuals, who receive these benefits, receive a Form SSA-1099, Social Security Benefit Statement, or Form RRB-1099, Payments by the Railroad Retirement Board, or Form SSA-1042S, Social Security Benefit Statement.

Social Security gives the same information included on the SSA-1099 or SSA-1042S to the IRS. SSA is required to provide the SSN on the Social Security Benefit Statement (SSA-1099) to notify recipients and the Internal Revenue Service of SSA benefits that are subject to income tax.